Solar: Smart policies, not trade war

The German company SolarWorld recently filed a trade complaint against China. The claim: China’s government has unfairly supported its domestic solar industry, and the U.S. solar industry can’t compete.

If there’s wrongdoing afoot, it should be addressed. But it is important to remember the big picture—the solar industry exists in a globalized market, and solar’s market growth depends on continuing to bring down costs. A trade war with China could close off America’s $1.9 billion net solar exports, raise prices for local solar markets (reducing U.S. solar demand) and hurt consumers and the more than 5,000 U.S. companies that support solar installation.

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Countries around the world have cumulatively invested tens of billions of dollars in solar energy over the last five years — a tremendous increase over the previous decade. That’s true of China — just as it’s true of Spain, Taiwan, Malaysia, India, Germany, Italy, Japan and the U.S. This investment has paid off in spades — global manufacturing capacity has soared. In the United States, solar is the fastest growing energy source.

It’s true that the U.S. share of solar investment lags behind China’s. Sadly, Uncle Sam’s investment in solar also falls far short of its support for fossil energy resources — which have a century-long history of continuing federal support. U.S. government subsidies for nuclear, oil, coal, gas and fossil fuels add up over $380 billion over the next five years, according to the Green Scissors report. Historically, fossil fuels receive annually about 13 times more than incentives going to all renewables, according to a recent report by DBL Investors.

The U.S. solar industry has been riding the on-again, off-again “solarcoaster,” though it most likely wants a clear and unwavering commitment from Washington.

The desire for incubation incentives is not unwarranted. Many fledgling U.S. industries have only reached mass commercialization because of a nudge — or the case of oil and gas, a century-long shove — from the government. Especially for an industry like solar, which promotes clean air, achieves a greater level of energy security and supercharges the local economy – more than $5 billion in 2010 alone.

Even with this backdrop of lean federal support here in the U.S., efforts in other countries and state-level solar policies here have consistently driven down the cost of solar. So much so that it can now be called “affordable” solar electricity. Through economies of scale and technological innovation, the global solar industry has achieved 70 percent cost reduction in solar panels since 2008.

In California, for example, utilities have signed over eight gigawatts of contracts for solar generation — of which four came in at rates below supposedly “unbeatable” new natural gas-fired power plants.

It’s a tremendous achievement—massive amounts of solar cheaper than the fossil-fuel alternative. But the industry’s ability to scale across the U.S. depends on being able to continue to drive costs lower.

This 70 percent cost reduction has helped create a U.S. solar industry that employs more than 100,000 Americans, with growth rates that far outpace the general economy. The vast majority – about 75 percent – of solar’s job and value creation is in project development and installation. These non-manufacturing jobs are inherently local to the market they’re serving – and so non-outsourceable.

Building U.S. demand for solar power is a sure way to create jobs at home. But market expansion depends on costs continuing to fall.

At the same time, the U.S. is also a net global exporter of solar products—in 2010, our trade surplus reached $1.9 billion. We are even a net exporter to China, with sales of commodity products, precision equipment and, yes, cutting-edge solar panels.